Poor City, Poor County

Now, both the City of Pittsburgh and Allegheny County are pushing ahead with plans to pry money out of the non-profit community, which, by and large, means the institutions in the City.

Both governments are facing difficulties balancing their out-year budgets so they are flailing around looking for any source of potential revenue they believe they might be able to intimidate or shame into coughing up money. The irony could not be more complete.

Hospitals and universities are endlessly hyped in marketing and self-promotion literature as the great drivers of the local economies. And they are. A large share of net new job growth is traceable to health care and education.

After imposing tax, regulatory and labor climates that are inimical to private sector expansion, the two governments (assisted by costly school districts) find themselves in position where raising taxes is likely to be counterproductive. Quite a conclusion for big government advocates. So what’s left to do? Go after non-profits that might have some extra money lying around. The question: where will they go when they milk all they can out of those institutions and it also turns out to be self-defeating and counterproductive and when they find still do not have enough cash coming in to fund government?

Cutting spending comes to mind. But why not do the cutting now before more revenue chasing does more harm to the area’s economy?

Living Wage Returns

Pittsburgh City Councilman Ricky Burgess wants to resurrect the City’s dormant living wage law. His action follows quickly on the heels of prevailing wage legislation being reintroduced after being vetoed by the Mayor. The Councilman’s rationale is that if the prevailing wage for workers on City subsidized projects is justice, then "why not justice for everyone?"

The City’s living wage bill was made dormant by a provision that the County would need to enact a similar law. Since the County has not done so, coming to its senses back in 2001 when it came up for a vote, the City version never took effect.

So why not do justice for everyone? Well for starters that City cannot afford it. Keep in mind that this is the same City that is buckling under the weight of its legacy costs and has been under state-controlled financial oversight since 2005 with no end in sight. To keep its head above water the City recently went after the university community by threatening to levy a tuition tax on all college students within its borders. While this attempt was unsuccessful, it underscores just how precarious City finances are.

The living wage ordinance doesn’t cover just firms receiving City subsidies. It covers firms contracting with the City and City workers themselves. Imposing the living wage law will only put more strain on finances. Firms with contracts will adjust their bid to cover the increased wage costs and the City’s personnel costs and contracted services will increase.

Of course the taxpayers will end up paying for this version of "justice"-something they can do without.

Missing the Housing Boom

Conventional thinking among local leaders is that because the area didn’t “boom” during   the last few years, it didn’t suffer the economic “bust” to the degree some other areas around the country have felt.  Most seem to view this as positive. From a short term perspective that might be true but over the long term the picture is not so rosy.  During the early months of the current recession the Pittsburgh area received substantial national publicity for being the economy that did not “bust”. But missing from these stories is how the region has lagged so far behind the national economy for two decades. One very important indicator of that slower growth is the number of building permits being issued for single family dwellings.

Continue reading

County Going Green, Needs Green

In the popular manner of the new paradigm, Allegheny County has just adopted a Sustainability Policy. The new law will focus on energy savings, reduced emissions and water conservation in the County government. Nothing wrong with that if implementing actions to save does not cost more than the projects save taxpayers.

But if the County is truly concerned about the environment and "green house" emissions why does it spend so much time and effort promoting job growth, trying to get more air service at the airport, etc. More economic activity means more travel by car and plane. Think of ongoing and recent initiatives. The Penguins new arena, the casino on the North Shore, fairly new stadiums for the Steelers and Pirates-all are efforts to attract people to the County and City. More event attendees, more car travel, and more emissions.

The County government steps to lower its pollution footprint will produce a drop in the bucket compared to the footprint created by the past and current "development" efforts.

There is one thing the "green" efforts have going for them. The huge decline in manufacturing in the City and County has largely taken care of the "emissions" problem already. Now, if we could do something about those annoying cars.

And, lest we forget, the County’s fiscal situation is not very good and is expected to get worse in coming years. Thus, we hear proposals about new taxes and fees on hospitals to generate more "green" for county coffers. Collecting more tax dollars is very difficult to do unless the economy is expanding, and that means more energy consumption, more emissions. What a dilemma the County faces. It needs green and wants to be "green". It’s not easy as the famous Muppet, Kermit, used to sing.

Lingering Problems at Pittsburgh International

The Allegheny County Airport Authority has released its budget for 2010.  And while it contains a very slight increase in expenditures over this year’s budget it has been necessary to boost airline charges to cover expenditures and to reverse a decline in revenues. These higher costs will ultimately be passed along to passengers or lead to lower profits for the airlines.

Continue reading

Another Blow Against City-County Mergers

Advocates of a city-county merger between Pittsburgh and Allegheny County constantly tout the economic development benefits they promise are sure to follow. It is claimed that consolidating City and County economic development agencies will make it easier to attract new firms. Of course they offer no credible evidence this will happen or that it has happened in other city-county mergers. But why let minor details such as convincing arguments or evidence stand in the way?

Continue reading

City Bookkeeping on the Brink of Collapse

News accounts quote the City Controller as saying, "We are talking potential calamity here…" referring to the City’s accounting system. The City’s ability to pay bills or even know where its money and other assets are could be lost. How utterly Pittsburgh this is; totally irresponsible when it comes to managing itself. Little wonder the City is in financial distress, it apparently cannot even concern itself with the most basic of management priorities-making sure the bookkeeping is done accurately, securely and in a timely manner.

Continue reading

County Catches Parking Privatization Bug

The County Chief Executive wants to explore the possibility of turning some 13k parking spaces at Pittsburgh International Airport over to the private sector. The hope is that a private interest would be attracted to the possibility of managing and profiting from airport parking and would give the County a massive up-front payment, something to the tune of $500 million or so. That money could then be used to retire a big chunk of debt related to the airport and hopefully lower the fees the airlines operating at the facility are now paying to help retire the debt. Those fees are very uncompetitive in comparison with other airports.

It is a good idea that should be explored. Much like the Pittsburgh proposal to turn over parking garages and lots to a private operator in order to get money to retire debt and shore up pensions, the County would have to work through a separate entity to get the deal done. In the case of the County it is the Airport Authority. The Authority would likely have to complete a valuation of the assets and determine bidding procedures, etc. Though some have been optimistic that the parking could fetch $500 million, considerations like staffing, maintenance, ability to increase rates, applicable FAA regulations, and private ownership (which would entail having to pay property taxes) might lower the number.

Another thing to keep in mind is the $110 million left from the gaming disbursement for retiring debt at the Airport. If a bid is pursued, is successful, but brings in less than the $500m, that money could be used to close the gap. If the bid brings in at least $500m (or more), there will be a strong temptation to use that money for other purposes (the County intercepts all of the money according to state law) that don’t involve paying off airport debt.